For 30-plus years Short Term Rental Property Management has been a massive industry in Florida. As in all things, technology brings change. Let’s talk about the sea change that has occurred over the last decade.
Three decades ago a property management company heavily relied upon Tour operators (Thomas Cook and Virgin Tours for example) The rise of vacation rental platforms like VRBO (Vacation Rental By Owner) and Airbnb has had a significant impact on the short-term rental property management business taking the guests from the third parties including the property managers (PM) themselves.
As a business broker when asked to do a valuation on a PM company I would always review several Key Performance Indicators (KPI) one of which was where the bookings came from. In the good old days the bookings were primarily sourced either from Tour Operators or by the PM company themselves (the latter being the more savvy and forward-leaning tech-oriented companies.) Interesting, is the demographic of both the consumers and the pm company owners. Then they were in their late 40’s and early 50’s…now they are in their 70’s. The children of those former guests who grew up on IPADS now the renters themselves.
Flash Forward to 2006 and 2008…the rise of VRBO and Airbnb… these two platforms (and HomeAway) gave convenience and power to the homeowner and consumer. A sea change to the PM company model now is in play.
Here are the summary of impacts:
1. Increased Competition: VRBO and Airbnb have made it easier for property owners to list their homes or condos as short-term rentals. This has led to a substantial increase in the number of available rental properties in Florida, creating fierce competition among property managers. Margin control shifted from the PM company over to the homeowner. PM companies in effect have lost much of this profitable revenue stream.
2. Pricing and Revenue Management: The transparency and ease of booking on these platforms have forced property managers to become more competitive with their pricing. To attract guests, they often need to offer competitive rates and adapt their pricing strategies to maximize revenue. Net Rate booking discussions as opposed to per night booking rate focus has now become the norm.
3. Evolving Guest Expectations: With the rise of these platforms, guests have come to expect a certain level of convenience, cleanliness, and amenities. Property managers must invest in maintaining and upgrading their properties to meet these expectations and receive positive reviews. With competition comes innovation. Innovation to consumer control. Guests have power and in the name of revenue PM companies shift to grab the consumers.
4. Technology Integration: Property managers have had to adopt new technologies and systems to manage bookings, guest communication, and property maintenance efficiently. Many property managers now use software and apps to streamline operations reducing costs to replace the lost margin from bookings now in the control of homeowners.
5. Marketing and Branding: Property managers have had to invest more in marketing and branding to stand out in a crowded marketplace. This includes creating appealing property listings, using professional photography, and actively managing online reviews. Costs of this increase for those who can not do it for themselves. Hiring consultants whose skills are often out of date by the time they are hired. (NOW CHATGPT RISES)
6. Regulation and Compliance: The growth of short-term rentals has prompted local governments in Florida and elsewhere to impose regulations and zoning restrictions. Property managers must navigate these rules and ensure that their listings are compliant to avoid legal issues. New York City just banned Short Term effectively…we will see more of this (despite the lower tax revenues)
7. Increased Revenue Opportunities: On the positive side, property managers have the opportunity to generate more revenue by listing properties on multiple platforms like Airbnb and VRBO, expanding their reach to a broader audience. They can expand footprints, become partners with other PM companies. It will force service expansion back to traditional services. I expect less competition as companies can no longer survive at 20 to 30 homes and they will exit making for more large companies…and prices will rise with further consolidation.
8. Shifting Business Models: Some property managers have adapted to the changing landscape by diversifying their services. This includes offering services such as property cleaning, maintenance, and concierge services to enhance the guest experience and generate additional revenue.
9. Guest Screening and Security: Property managers have also had to implement stricter guest screening processes and security measures to protect both their properties and guests, as the openness of these platforms means that not all guests may be suitable.
In summary, the rise of VRBO and Airbnb has transformed the short-term rental property management business in Florida by increasing competition, changing guest expectations, and requiring property managers to adopt new technologies and strategies. While these changes have created challenges, they have also opened up new opportunities for property managers to thrive in this evolving industry.
For more on Property Management and the buying and selling of vacation rental companies contact Tampa Business Broker Michael Shea of Transworld Business Advisors at 321-287-0349